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58 likely to be this mass exodus as COVID-19- related forbearance allowances expire. Still, those numbers mean millions of borrowers will require assistance from default servicing professionals. "e CFPB has been pretty clear that servicers need to be very, very ready with things like staffing and having people who can handle these situations," Haynie said. "ese are not quick phone calls—you need people that are trained. e CFPB has put the industry on notice that you need to be ready to take care of this." Many borrowers in forbearance today have the option to list their property and make a profit, which was not the case during the previous financial crisis. It's an undeniably difficult time to purchase a new home, but selling is a way out that is more attractive than foreclosure, Haynie said. "And [the seller] could probably do pretty well in most places across the country, where home prices have rapidly appreciated." ough he agrees the federal response to the COVID-19 crisis was substantially more effective than anything seen during the last financial crisis, Tim Rood, Head of Industry Relations at SitusAMC, says he ultimately would prefer the federal government buy the homes or mortgages of distressed households than continue on a course of repeated forbearances and foreclosure moratoriums, which require servicers to finance the government's policies and create unconscionable hardships for mom-and-pop investors. Striking a balance between protecting struggling families and preserving the integrity of housing finance systems could prove considerably difficult, Rood said. "My fear is that if we continue to extend these policies that they will eventually erode the confidence of investors and insurers and imperil the integrity of the mortgage and real estate markets." Rood says about nine in 10 borrowers in forbearance have enough home equity to sell and have sufficient proceeds to cover their transaction and moving costs if they do not qualify for a deferral or modification. Either way, servicers will be left to sort out and process these foreclosure prevention activities. "It will be a substantial strain on their capacity and come with considerable costs on top of the financial demands from continuing to advance billions of dollars a month to mortgage-backed securities holders," Rood said. "Given the universal desire to avoid another foreclosure crisis, servicers will be working through hundreds of thousands of deed-in-lieu and short-sale requests, which tend to be very labor intensive." While no one we spoke with expects a great flood of foreclosure activity, Tobias Peter, AEI Housing Center's Director of Research, says certain neighborhoods with a disproportionate share of high-risk Federal Housing Administration (FHA) lending, may be more at risk than others. "We are certainly closely watching FHA's monthly delinquency numbers," he said. "While they have been declining over the past two months, 14.6% of FHA's active portfolio currently are delinquent and 11% are seriously delinquent." CONSIDERING THE CFPB Steve Bartlett, Senior Advisory Board Member at Treliant who previously served as President and CEO of the Financial Services Roundtable and as a U.S. Congress Representative in the 1990s, says servicers should expect much more intense CFPB oversight in 2021. "e Acting Director [Dave Uejio] and the Director-Nominee [Rohit Chopra] of the CFPB have stated they plan to have a much more aggressive enforcement unit, with emphasis on fair lending and fair servicing, so mortgage servicers who have not been "Given the universal desire to avoid another foreclosure crisis, servicers will be working through hundreds of thousands of deed-in-lieu and short- sale requests, which tend to be very labor intensive." —Tim Rood, Head of Industry Relations, SitusAMC Cover Story By: Christina Hughes Babb

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